I. Field of the Invention
The present invention generally relates to systems and methods for financial processing and accounting. More particularly, and without limitation, the present invention relates to systems and methods for processing financial transactions in an automated and traceable manner.
II. Background Information
Enterprise resource planning (“ERP”) systems and other enterprise technologies have transformed customer and supply chain processes, but that finance's performance has hardly changed. While some companies have profoundly improved the performance of their financial processes through ERP systems, financial functions are still neglected in many businesses. For example, finance department costs can consume more than 1% of revenues in many companies, and chief financial officers struggle with poor transparency of their daily cash flows.
In times of economic uncertainty and soaring shareholder expectations, every business function is under closer scrutiny, including finance functions. The primary objective for a better finance department is still the same: manage cash and tie up as little working capital as possible. The key performance indicator in this context is the cash flow cycle, which encompasses the time period from when a supplier delivers materials until the receivables department collects cash or payment from customers. The longer the cash flow cycle is, the higher the working capital needs to be. Every reduction made within the cash flow cycle will immediately free up liquid assets.
One approach to reducing the cash flow cycle is to consider finance itself as a supply chain—a multifaceted, end-to-end flow of transactions, cash, value, and information that touches customers, suppliers, banks, and internal functions and relationships. Unlike the physical supply chain, the financial supply chain deals with the flow of cash instead of goods. Indeed, the financial supply chain runs through a company's business like a thread, tying together every function and process. Just like in the physical supply chain, every day that is lost in the cash-to-cash cycle equals lost revenue.
The benefits of a financial supply chain go far beyond cutting costs. Days in payables, for example, can be reduced by decreasing payment terms. On the other hand, companies want to avoid putting their relationships with key suppliers at risk, so they must strategically differentiate how they deal with their individual suppliers. An efficient financial supply chain will drive forward every aspect of the business, give management the tools it needs for continuous improvement, and provide more visibility into a company's financial supply chain network to deal with ever-growing compliance requirements.
One of the key difficulties in optimizing a financial supply chain is that the parties involved (e.g., intra-corporate organizations, corporate subsidiaries, external suppliers, and external customers) often have different expectations for how financial services should be rendered. Differences in computing environments can also pose difficulties in the communication and tracking of financial information and transactions. For example, Company A might expect to receive an invoice in one digital format, but Company B may always uses a different digital format for invoices. Consequently, a person at Company A typically must intervene to process the invoice from Company B, but this intervention might not be necessary if the invoice had been presented in Company B's format in the first place.
Minimizing the differences between the players in the financial supply chain would help alleviate this problem and would offer several benefits. For example, it would reduce the amount of manual intervention necessary in the process, thereby reducing the order-to-cash cycle. It would also facilitate inter-company reconciliation, speeding the period-end close process. The result is a more automated, straight-through processing environment that would improve the transparency of the financial process, allowing it to be more accurately analyzed for process improvements.
One approach to minimizing differences between the players in the financial supply chain is to require them all to standardize their information technology. Given the wide array of financial systems in the marketplace and the massive number of entities with which some companies conduct financial transactions, this approach is unworkable and cost prohibitive. Another approach is to centralize all of the information technology related to financial transactions between the players in the financial supply chain. Again, this approach has proven unworkable and cost prohibitive. An ideal solution would allow each player in the financial supply chain to maintain their own computing environment, while at the same time allowing standardized communications with other players in the financial supply chain.